The first provision is the change recommended to section 4 (b). The present law provides that wages are on a paid basis, but occasionally just before bankruptcy or receivership the wages cannot be paid because of a court order. In order that these employees who do not get their wages will not lose benefits, it is recommended that when such wages were not paid solely because of court order, that they be deemed constructively paid. The next provision is an amendment to section 4 (c) (1), which tolls the running of interest in cases that are under administration under court supervision, such as bankruptcy or receivership or estate cases when the tax cannot be paid until the court so orders. It is not felt that the taxpayers should suffer interest charges in such cases. when the payment cannot be made. The money generally does not amount to a whole lot and it is often difficult to collect, so it is recommended that this provision be put in. The second amendment to section 4 (c) is in subparagraph (2). In the 1954 amendments effective January 1, 1955, a penalty was established for the failure to either file or pay the taxes when due. This penalty provision has been very effective, but there is a twilight group of cases where it has caused hardships and bad public relations not helping the Board's administration either. When 1 or 2 days after the due date the tax is paid, often the employer claims it is mailed on time, but it is postmarked late, and of course we have had to take the postmark date. Then you are into a waiver of the penalty which doesn't create good public relations. This provision would set up a 15-day period of grace so that the penalty would not be set up until the 15th day after it is due, the idea being that during that 15-day period it would be impossible administratively for the Board to take any action to get this money. They would be so busy processing the income and reports that we would not even have that in a collection section at that time, and it is felt that it would be quite helpful from an all-round viewpoint to have a 15-day grace period. The next provision is section 4 (d). It is designed to clarify the priority of the unemployment compensation taxes in connection with death, dissolution, insolvency, bankruptcy, etc. Since the bill was introduced, a study has been made of it in relation to other District of Columbia taxes. The Commissioners would like this provision to be removed from the bill, with the thought that at a later time the priorities of all District taxes would be considered together rather than on a piecemeal basis. The final provisions are the amendments to section 19 (e). Present law contains a provision for the disqualification of individuals who have committed fraud against the Board in obtaining unemployment compensation benefits. These individuals are subject to disqualification after a hearing before the appeals examiner. This provision would change the hearings to the deputy level. The deputy in all other disqualifications initially assesses the disqualification, so instead of starting at the appeals examiner level, which limits the number of cases that can be handled, it is proposed that these hearings be held before the deputy with right to appeal to the appeals examiner and to the Board and into the courts the same as they had on all other disqualifications. And as for the final provision, under the present law if an individual is disqualified under this broad provision, it is possible that when he has received benefits for weeks later than the ones for which he was disqualified, these have automatically become disqualified, too. Thus, if the man was disqualified for fraud in January and he had properly drawn benefits in February, the disqualification, of course, would be made retroactively. It has carried the February benefits with it, so they they have been rule overpaid. This change would provide that any benefits properly paid between the fraud and the hearings would not be declared overpaid, and to clarify the language, it is recommended that on page 3, line 17, after the word "benefits," that the two words, "otherwise properly" be inserted. I think that covers it, Mr. Chairman, and as I understand it, neither the Board nor the Commissioners have any objection to the bill other than to section 4 (d) which they strongly recommend be eliminated. Senator HOBLITZELL. Do you want this letter in? Mr. MACKALL. That would be perfectly all right, but it does not carry the recommendation that 4 (d) be deleted. I think it should be strongly understood that 4 (d) does not meet with the Commission's approval. Senator HOBLITZELL. A letter under date of June 25, 1957, over the signature of Mr. Louis Mackall, Jr., will be put in the record at this point. (The letter referred to is as follows:) GOVERNMENT OF THE DISTRICT OF COLUMBIA, WILLIAM P. GULLEDGE, Esq., Counsel for the Senate District Committee, Washington, D. C. DEAR MR. GULLEDGE: At your request I am submitting an analysis of a bill to amend the District of Columbia Unemployment Compensation Act which was drafted by this office at the request of Senator Schoeppel. It is proposed to amend section 1 (b) (5) (F) so that individuals employed by a Senator, Representative, etc., or a group of the foregoing are not covered by the act if their services are in connection with political or legislative matters. Under the present act these individuals are not covered only if their work is in connection with legislative duties. At the present time it is believed that there may be organizations of this type in the Capitol or various other buildings on the Capitol grounds that have not registered with this Board because they did not realize themselves to be liable for the payment of contributions. In the past there has been little or no demand by individuals for benefits based upon wages paid by such organizations. In the event any of these organizations should desire to protect their employees this could be accomplished by voluntary election. It is proposed to amend section 4 (b) so as to include wages as constructively paid when they are unpaid solely because of a court order appointing a fiduciary. In the District as in most States an employer pays taxes on wages only if paid to the employee. The particular amendment is designed to eliminate difficulties particularly in bankruptcy cases. Often employer are adjudicated bankrupt owing a small amount of wages to their employees. Inasmuch as these wages have not been paid proof of claims in bankruptcy do not include these amounts. At a much later date these amounts are paid by the trustee as wage claims. At least two of the United States circuit court of appeals have ruled that the payment of these wage claims constitutes the payment of wages for the purpose of unemployment compensation. This means that whenever wage claims are paid it would be necessary to amend the proof of claim in order to claim the additional wages. It has always been the contention of this Board that such wages must be reported at the contribution rate for the year in which paid. The referee in bankruptcy feels that these amounts should be calculated at the contribution rate for the year in which the employer was adjudicated bankrupt. The proposed section would eliminate the necessity of filing amended claims and any question as to rates and it would also eliminate the necessity for expensive litigation in order to determine whether the referee in bankruptcy's construction or the Board's construction is correct. It is proposed to amend section 4 (c) (1) so as to toll the running of interest when payment is not made because of administration under supervision of court. This would involve bankruptcy, receivership, and probate cases which are often of lengthy duration. It is not felt equitable to charge interest during the period when the fiduciary is not able to pay. Generally it is sometime until court order is signed allowing payment. Beginning January 1, 1955, a penalty provision for the late filing or payment of contributions was established. This provision was included in section 4 (c) (2) and was designed to force individuals to file and pay their contributions on time in order to cut down the Board's delinquency rate and eliminate some work in the collection of taxes. This section has been quite effective but it is believed that the proposed amendment would make it even more effective than existing law. It is proposed that the penalty not be set up on the date that the contributions are due but be imposed if the reports are not filed or paid within 15 days of the due date. This establishes a grace period, for penalty purposes only, of 15 days. From an administrative standpoint no action could be taken during this 15-day period and thus the effectiveness of the penalty would not be lost. It has been found that much good will is being lost by the Board in connection with reports mailed on time but postmarked at a later date, thus causing penalties to be established. This has created an administrative problem as most of these penalties are waived and must be handled out of the normal course of operations. It is proposed to amend section 4 (d) in the case of death, dissolution, insolvency, receivership, bankruptcy, composition, or assignment for benefit of creditors to place the taxes due the Board on a parity with taxes due the United States. At the present time the auditor of the District Court of the United States for the District of Columbia has treated taxes due the Board on a parity with taxes due the United States. However, the referee in bankruptcy for the same court has questioned that the contributions due this Board are on a parity with taxes due the United States by virtue of this section. Section 4 (d) has been redrafted to eliminate any ambiguity and the reason that it is sought to place the taxes on a parity with those of the United States and not with other taxes due the District of Columbia is because of the fact that various taxes due the District of Columbia come in different categories and are not on a parity with each other. In January 1955 section 19 (e) became a part of the District of Columbia Unemployment Compensation Act. That provision allows the Board administratively to rule that an individual who has committed fraud against it to be declared ineligible for benefits for the remainder of the benefit year and for as long as 1 year thereafter. This section has been quite effective but could be even more so. At the present time such findings must be made by the Board's appeals examiner and as the Board only has one individual in this category it limits the number of cases that can be handled. Normally other disqualifications are acted upon by claims deputies and it is believed that this provision should also be handled by a claims deputy with right of appeal to the appeals examiner. In these cases, as a general rule, it is some little time before the fraud is discovered and under the present provision if the claimant is disqualified benefits which have been properly paid, at the time of payment often become overpaid as a result of the ruling. These amounts are frequently out of proportion to the fraud involved and the proposed recommendation would be that a disqualification shall not affect benefits paid after the date of such fraud and prior to the date of the ruling of disqualification. Section 2 would make all provisions effective at the beginning of the calendar quarter after passage except the amendment to section 1 (b) (5) (F). It is believed best to have provisions effective at the beginning of a quarter. Section 1 (b) (5) (F) is made retroactive to January 1, 1936, in case there are organizations unknown to the Board who have unconsciously failed to register with it. It is proposed that no refunds be made because of any retroactive ruling in order to keep the provisions of the District of Columbia Unemployment Compensation Act in conformity with section 303 (a) (4) of the Social Security Act. Sincerely yours, LOUIS MACKALL, JR., Attorney. Senator HOBLITZELL. How many cases come under these sections? Mr. MACKALL. We do not have figures on that, but they are right numerous. Senator HOBLITZELL. They are numerous? Mr. MACKALL. Yes, sir; it has become a burden administratively. Senator HOBLITZELL. Mr. McLaughlin, do you have any statement? STATEMENT OF ROBERT E. MCLAUGHLIN, PRESIDENT, BOARD OF COMMISSIONERS, DISTRICT OF COLUMBIA Mr. MCLAUGHLIN. Nothing further on that bill, Mr. Chairman. Senator HOBLITZELL. Would you like to have your letter put in the record? Mr. MCLAUGHLIN. Yes, may that be inserted in the record, please. (The letter referred to is as follows:) GOVERNMENT OF THE DISTRICT OF COLUMBIA, Hon. ALAN BIBLE, Chairman, Committee on the District of Columbia, United States Senate, Washington, D. C. MY DEAR SENATOR BIBLE: The Commissioners of the District of Columbia have for report S. 2419, 85th Congress, a bill to amend the District of Columbia Unemployment Compensation Act, and for other purposes. S. 2419 amends section 1 (b) (5) (F) of the District of Columbia Unemployment Compensation Act to exempt from the coverage of the act individuals employed by a Senator or Representative or a group of the foregoing if their services are in connection with political or legislative matters. Under the act these individuals are not covered only if their work is in connection with legislative duties, At the present time it is believed that there may be organizations of this type that have not registered with the District of Columbia Unemployment Compensation Board because they did not realize themselves to be liable for the payment of contributions. In the past there has been little or no demand by individuals for benefits based upon wages paid by such organizations. In the event any of these organizations should desire to protect their employees this could be accomplished by voluntary election. The bill also amends section 4 (b) of the act so as to provide that wages will be considered as being constructively paid when they are unpaid solely because of a court order appointing a fiduciary. In the District, as in most States, an employer pays taxes on wages only if paid to the employee. The proposed amendment of section 4 (b) is designed to eliminate difficulties in bankruptcy cases particularly. Often employers who are adjudicated bankrupt owe some wages to their employees. Inasmuch as these wages have not been paid, proof of claims in bankruptcy do not include these amounts. At a much later date these amounts are paid by the trustee as wage claims. At least two of the United States circuit court of appeals have ruled that payment of these wage claims constitutes the payment of wages for the purpose of unemployment compensation. This means that whenever wage claims are paid it would be necessary to amend the proof of claim in order to claim the additional wages. It has always been the contention of the District of Columbia Unemployment Compensation Board that such wages must be reported at the contribution rate for the year in which paid. The Commissioners are informed that the referee in bankruptcy feels that these amounts should be calculated at the contribution rate for the year in which the employer was adjudicated bankrupt. The proposed amendment would eliminate the necessity of filing amended claims and any question as to rates, and would also eliminate the necessity for litigation to determine whether the referee in bankruptcy's construction or the Board's construction is correct. Section 4 (c) (1) of the act would be amended by S. 2419 in such manner as to toll the running of interest when payment of contributions is not made because of administration under supervision of the court in bankruptcy, receiver 24607-58--2 ship, and probate cases, which are often of lengthy duration. It does not appear equitable to charge interest during a period when the fiduciary is not able to pay, particularly since a court order allowing payment may not be issued for a considerable period of time. Effective January 1, 1955, there was incorporated in the act a penalty provision for the late filing or payment of contributions. This provision was included in section 4 (c) (2) and was designed to force individuals to file and pay their contributions on time in order to cut down the Board's delinquency rate and to eliminate some work in the collection of taxes. This section has been quite effective, but it is believed that the proposed amendment would make it even more effective. Under the proposed amendment the penalty would not be set up on the date that the contributions are due, but would be imposed if the reports are not filed or paid within 15 days of the due date. This change would establish a grace period, for penalty purposes only, of 15 days. From an administrative standpoint no action could be taken during this 15-day period, and thus the effectiveness of the penalty would not be lost. It has been found that much good will is being lost by the Board in connection with reports mailed on time but postmarked at a later date, thus causing penalties to be established. This has created an administrative problem, as most of these penalties are waived and must be handled out of the normal course of operations. With respect to the proposed amendment of section 4 (d) of the act, the Commissioners are constrained to register an objection. This amendment will confer a priority upon the District of Columbia Unemployment Compensation Board in cases of death, dissolution, insolvency, receivership, bankruptcy, composition, or assignment for benefit of creditors of any employer, for contributions then or thereafter due the Board from such employer. The Board's claim for contributions, in the proposed amendment, would "have priority over all other claims, except that such contributions shall be on a parity with taxes due the United States and subservient to wages (not exceeding $600 with respect to any individual) due for services performed within the 3 months preceding such event." While the proposed amendment is intended to remove some uncertainty as to the respective priorities of United States and District taxes and contributions to the Unemployment Compensation Board, the Commissioners believe that the amendment would increase, rather than decrease, any uncertainty which may be said to exist. The language of the amendment is objectionable primarily because it would result in placing the Board in a favored position over the District of Columbia in the matter of the collection of District taxes. The amendment also would appear to raise a number of questions concerning the relative priority of the United States and certain District taxes, and may create some doubt concerning the effect of the National Bankruptcy Act insofar as it relates to claims of the Unemployment Compensation Board. In view of the foregoing, the Commissioners recommend against the enactment of the proposed amendment of section 4 (d) as set forth in lines 24 and 25 of page 2, and lines 1 through 8 of page 3 of the bill. The act of August 31, 1954, amended the District of Columbia Unemployment Compensation Act to add subsection (e) to section 19. This subsection authorizes the Board to declare an individual who has committed fraud against it ineligible for benefits for the remainder of the benefit year and for as long as 1 year thereafter. This subsection has been quite effective, but the Commissioners believe that the proposed amendment of subsection 19 (e) from one standpoint would make it more equitable, and from another standpoint, more easily administered. Under existing law, a person making a false statement or failing to disclose a material fact for the purpose of obtaining or increasing any benefit or other payment "*** may be required by the Board to repay to it for the fund a sum equal to the amount of all benefits received by him for weeks subsequent to the date of the offense and falling within the benefit year current at the time of the offense. Such claimant may also be disqualified for benefits for all or part of the remainder of such benefit year and for a period of not more than 1 year commenc |